There’s no denying that big employment law changes are on the horizon. Last year, the Employment Rights Bill introduced 28 significant reforms which are set to reshape the landscape of employment law. However, with the majority of these reforms not anticipated to take effect until 2026, what can employers actually expect to happen in UK employment law during 2025? 

Whilst we can expect the usual changes to rates in April, as well as various other technical changes (such as changes to employment tribunal procedure), this article considers the major highlights employers should watch out for.

Minimum wage reform 

One of the most significant changes in 2025 will be an increase in the rates of the National Minimum Wage and National Living Wage. 

The government has accepted the recommendations of the Low Pay Commission (LPC) in full and there will be significant increases to minimum wage rates from April. Last year, the government asked the LPC to take steps to remove the 18-20 year old rate and eventually achieve a single adult rate by narrowing the gap between this and the National Living Wage (which applies to those aged over 21). This will result in an increase of 16.3% to the 18-20 year old rate in April 2025.

The current rates and 2025 rates are as follows: 

These rises, especially given the context of significant minimum wage rises in previous years and the recently announced increase to employer’s National Insurance contributions, will inevitably impact employers. In particular, alongside the obvious increase in costs: 

• It will mean that many employers that have not historically had to worry about their employees’ wages falling below the legal minimum could be at risk of an inadvertent breach (particularly once factors such as additional hours worked, salary sacrifice, and any other pay deductions are accounted for). Note that an employee being paid the new National Living Wage from April of £12.21 per hour and working a 37.5 hour week would be paid just under £24,000 a year, so employers should check their starting salaries and take a closer look at which roles are on the cusp of minimum wage rates. 
• It may also compress an employer’s existing pay structure, meaning that those employees starting entry level jobs paid at the NMW receive a salary closer to the level of their managers’ (which the employer is not obliged to increase). This inevitably puts pressure on employers to adjust their overall pay structure. 

Non-compliance with minimum wage law has serious consequences, including penalties, “naming and shaming” and, potentially, even criminal liability – so it’s important to take steps now to check for compliance. 

Neonatal leave and pay 

The Neonatal Care (Leave and Pay) Act 2023 will give parents a right to 12 weeks’ leave and pay when their baby requires neonatal care, in addition to existing parental leave entitlements. We have written in detail about the rights provided by the Act here. These rights will only be delivered when statutory instruments bringing in the new leave and pay entitlements come into effect and the timing will depend on the approach taken by the new Labour government. However, we currently expect this to take place as planned in April 2025. 

Paternity leave for bereaved partners

The Paternity Leave (Bereavement) Act 2024 was passed in May last year, but regulations are needed to bring the Act into force. Broadly speaking, the Act will provide bereaved partners with paternity leave when the mother (or a person that a child is placed, or expected to be placed, with for adoption) dies. The bereaved partner would not require the usual 26-weeks’ minimum service to benefit from the leave and, whilst not set out in the Act, it is believed that the regulations would increase the amount of paternity leave available, with the intention being to provide 52 weeks’. We have written about the Act in detail here. 

The previous government indicated that it was aiming for the new rights to be in force from April 2025 but, despite Labour committing to pass the necessary legislation were it to win the general election, it is currently unclear exactly when the regulations will come into force and whether Labour’s other legislative plans could impact this.  

Restrictions on bankers’ bonuses to be relaxed

In 2023, financial regulators scrapped the cap on bankers’ bonuses. There are now plans to go further with a deregulation agenda  and several significant policy reforms have been proposed, including in relation to restrictions on variable remuneration and the processes relating to Material Risk Takers. It is possible that we could see these changes towards the end of the year (for performance periods beginning after a certain date) but this remains uncertain. 

Significant changes contained in the Employment Rights Bill

The Employment Rights Bill was published in October 2024 and contained 28 significant reforms. Accompanying this, the government released a ‘Next Steps to Make Work Pay’ document, outlining plans for future reform.

Key changes 

We have written about these potential reforms in detail, but some of the most talked about include:

• a ‘day one’ right for employees not to be unfairly dismissed;
• reforms to collective consultation; 
• restrictions on ‘fire and rehire’; 
• the new guaranteed hours offer for zero- and low-hours employees;
• employers to be held liable for harassment by third parties; and 
• stronger rights to request flexible working. 

Timeline for changes

In terms of the timeline, it is currently unclear exactly when the Bill will pass but we would expect this to happen by the middle of this year. Consultations on supporting regulations (to actually implement the Bill) would be expected to follow at the very latest by the end of this year, but the government has confirmed that most of the reforms will not be put into practice until 2026. It has also been at pains to reassure employers that the reforms to unfair dismissal law, perhaps the most controversial, will not come into effect before Autumn 2026. 

Notwithstanding the above, a number of minor reforms relating to trade unions will come in this year. This includes the repeal of the Strikes (Minimum Service Levels) Act 2023 and most of the Trade Union Act 2016, which would take place as soon as the Bill is passed and roll back almost all of the restrictions on calling strike action introduced by Conservative-led governments since 2010. However, the most significant changes to trade union rights, including the planned right of access to workplaces and changes to make it easier for unions to require them to be recognised, are not expected to happen until 2026.

It is also possible that some of the Bill’s reforms which do not require implementing regulations will come into force sooner than 2026, but this is currently unclear. We had predicted that implementing the proposed reforms to Statutory Sick Pay more swiftly might be a quick win for the government but, given the backlash it has faced following the Autumn 2024 budget (where it announced an increase to employer’s National Insurance contributions), it may now be reluctant to take action which could be seen to further increase the burden on employers. 

One of the most significant impacts of the Bill this year will be the scale of the consultations that the government will launch regarding a number of key measures contained in the Bill. We also expect a consultation regarding a draft statutory Code of Practice on the “right to disconnect” for employees to be launched this year (although this did not feature in the Bill). Additionally, whilst the Bill itself contains fairly minor tweaks to parental leave and paternity leave, we are expecting wider review and reform to the family leave system. It is clear from the government’s ‘Next Steps to Make Work Pay’ document, released alongside the Bill, that it is committed to reviewing the current parental leave system which “does not support working families”. The government has previously indicated that it will aim to complete this review during its first year in government so we assume this will take place by July this year.    

Finally, we expect that the new Equality (Race and Disability) Bill will be published in draft for consultation. This is something employers should watch closely as it is expected to extend equal pay laws to cover ethnicity and disability, as well as introducing compulsory ethnicity and disability pay reporting for larger employers (with 250 or more employees).

Significant case law decisions expected: 

We expect the courts to be busy this year, but a couple of the cases we think are of particular interest are as follows: 

Other trends/policy areas to watch 

Last year, we saw the introduction of a duty requiring all employers to take reasonable steps to prevent sexual harassment. This remains a current focus, with businesses still getting to grips with risk assessments, enhanced training and ongoing initiatives. We expect this to remain at the forefront of employers’ minds throughout the year, particularly as the Employment Rights Bill promises to introduce further duties for employers regarding harassment. 

In terms of diversity, equity and inclusion, we have seen an increasing focus on supporting the development and performance of neurodiverse employees in the workplace and expect this trend to continue. More generally, we anticipate rising tensions as DE&I initiatives come under increased scrutiny in the US following the re-election of Donald Trump and the UK government pushes through more ambitious equality legislation, putting many companies in a difficult position. Trump’s election is also expected to affect global flows of people, both to and from the US and in other regions of the world.  

Finally, it goes without saying that the adoption of AI is accelerating in the workplace. Although employers in the UK will be caught by the EU AI Act if they use AI systems that affect individuals located in the EU, there is a notable lack of UK legislation specifically governing this area and nothing on the immediate horizon. Although 2024 saw the publication of government guidance on topics including responsible AI in recruitment, employers are facing the challenge of harnessing the potential of this new technology within a legal framework written long before the dawn of ChatGPT. This is becoming increasingly inadequate given the transformative impact this technology has already had on workplace decision making. 

Summary 

The next few years are set to be transformative for UK employment law, with significant changes on the horizon. The biggest changes, however, are happening next year rather than this year. 

In 2025, the main stories will be increased employment costs (from employer’s National Insurance contributions and minimum wage hikes), the passing of the Employment Rights Bill (confirming that key changes, such as those relating to collective redundancy consultation and fire and rehire, will take place) and the initiation of some weighty consultations.

The consultations should start to answer some of the key questions we have in terms of the Employment Rights Bill – including, for example, what the new “light touch procedure” for dismissals in the early months of employment will actually involve (i.e. just a letter, or a letter and a meeting) and how many hours will need to be guaranteed to lift a worker out of the new guaranteed hours regime. We should also gain some insight into how race and disability pay reporting is expected to work and what the new “right to disconnect” will look like. 

The upcoming consultations will be a crucial opportunity to shape the future of employment law, and Lewis Silkin will be contributing its views, so please do continue to share your perspectives with us.